CHICAGO – The value of General Growth Properties Inc. (NYSE: GGP)’s stock has bounced back this week after hedge-fund manager Pershing Square Capital Management LP purchased a 20-percent stake in the cash-hungry mall owner.
General Growth – which owns and manages more than 200 malls, including Providence Place and the Silver City Galleria – has seen its share value plunge amid slumps in the retail and real estate industries, until this month its market capitalization fell so low the company was dropped from the Standard & Poor’s 500. And in a Nov. 10 regulatory filing with the U.S. Securities and Exchange Commission , the REIT announced that it might have to consider seeking bankruptcy protection if it were unable to extend or refinance its short-term debt. (READ MORE)
But in an SEC filing yesterday, Pershing Square revealed that between Nov. 13 and Nov. 17, the fund had acquired 20.1 million shares in the real estate investment trust (REIT) for $9.3 million, according to Bloomberg News.
Until this week, General Growth shares had hovered near their record low of 35 cents, recorded on Nov. 12. The stock ended last week at 41 cents. But Monday, the price of General Growth stock more than doubled to close at $1 per share. And yesterday, it rose to $1.36 on news of the Pershing Square stake – boosting the value of the hedge fund’s $9.3 million purchase to $27.3 million.
Pershing Square – managed by investor William Ackman – also has an interest in a further 33.4 million General Growth shares, or 12.4 percent of common stock outstanding, via total-return swaps it acquired Nov. 20 to 24 at prices of 49 to 70 cents per share, the New York-based hedge fund told the SEC. Those swaps expire by Jan. 31, 2011.
The hedge fund’s stake “is the first sign that any investor has expressed a strong interest in the company or sees significant value beyond the mountain of debt,” Merrill Lynch & Co. analysts Steve Sakwa and Craig Schmidt wrote in a note to investors yesterday, according to Bloomberg News. General Growth faces a Friday deadline for $958 million in short-term debt and a mid-2009 deadline for another $3.07 billion.
But Ross L. Motrich, an analyst with Barclays Capital, reminded investors that the value of the REIT’s holdings still exceeds its share price. “We believe there is potentially $7 to $16 of real estate value to GGP shares, albeit with a high amount of risk in realizing that value,” he wrote.
The rise in share price boosted General Growth’s total market value to $268 million at yesterday’s close. It also was good news Fidelity Investments, which as of Nov. 7 had a 24-percent stake in General Growth, making it the largest shareholder apart from the founding Bucksbaum family. (READ MORE)
The shares today appeared to be maintaining yesterday’s gains, trading at $1.32 as of 10:11 a.m.
General Growth Properties Inc. (NYSE: GGP) – owner of Providence Place and the Silver City Galleria in Taunton and manager of the Swansea Mall – is a publicly traded real estate investment trust (REIT). GGP’s portfolio includes about 200 million square feet of retail space and more than 24,000 stores, as well as stakes in various master-planned community developments and commercial office buildings. Additional information is available at www.ggp.com.
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